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Economics > Theme 2 > Flashcards

Theme 2 Flashcards

1
Q

explain economic grotwh

A

measures the rate the GDP of a. country changes over a year

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2
Q

explain the difference between real and nominal

A

real takes into account inflation whereas nominal doesn’t

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3
Q

explain the difference between total and per capita

A

total is the total GDP of everyone in the UK whereas per capita is per person

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4
Q

explain gross national product

A

the total market value of the final goods and services produced by a nations economy during a specific period of time

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5
Q

explain gross national income

A

the total income earned by a country’s people and businesses even if it was earned outside the country

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6
Q

explain inflation

A

the general rise in prices

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7
Q

explain deflation

A

the general fall in prices

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8
Q

explain disinflation

A

the general rise in prices but at a slower rate than before.

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9
Q

explain demand pull inflation

A

as there is more demand for the product the price rises

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10
Q

explain cost push inflation

A

Firms push the cost of production onto the consumer

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11
Q

explain growth of money supply

A

an increase in the. supply of money lowers interest rates which generates more investment and puts more money in the hands of the consumers so increases spending

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12
Q

explain the effect of inflation on consumers

A

as prices are higher they can no longer buy as much with their money than before

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13
Q

explain the impact of inflation on firms

A

they receive less sales for products as they’re more expensive so less profit

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14
Q

explain the effect of inflation on the government

A

they have to pay more subsidies and benefits so are worse off

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15
Q

explain the claimant count

A

measures people who are eligible to claim benefits in the UK

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16
Q

explain benefits of claimant count

A

up to date + useful
easy to understand
cheap to access

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17
Q

explain drawbacks of the claimant count

A

misses out those who are unemployed
not broken down by gender, ethnicity
not used in Europe

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18
Q

explain the ILO survey

A

a survey of 60,000 people across a society and counts those who are without any kind of job in the 4 weeks and are able to start within the next 2 weeks

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19
Q

explain benefits of the ILO survey

A

used in Europe
wider criteria
measures students + retirees

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20
Q

explain drawbacks of the ILO survey

A

can be out of date
surveys can be inaccurate

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21
Q

explain employment

A

the number actively working in the UK and is contributing to. the economy

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22
Q

explain unemployment

A

when someone is willing and able to work but doesn’t have a job

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23
Q

explain under-employment

A

when someone has a job but doesn’t work as many hours as they could ( part time job )

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24
Q

explain inactivity

A

when someone doesn’t have a job and aren’t looking to find a new job

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25
Q

explain structural unemployment

A

long-lasting unemployment that comes about due to shifts in an economy

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26
Q

explain frictional unemployment

A

occurs with voluntary employment transitions within an economy

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27
Q

explain seasonal unemployment

A

occurs when people are unemployed at particular times of the year when demand for labour is lower than usual

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28
Q

explain demand deficiency

A

occurs when their isn’t enough demand for goods and services in the economy leading to reduction in production and a corresponding reduction in employment

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29
Q

explain cyclical unemployment

A

occurs when people are unemployed at different times of the year

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30
Q

explain real wage inflexibility

A

occurs when the minimum wage set causes employees wages to be higher than what would be determined by the market forces of supply and demand

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31
Q

effects of migration on employment

A

they can fill in jobs that are available in the economy

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32
Q

effects of migration on unemployment

A

they could take jobs that unemployed people in the UK could do

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33
Q

explain effects of unemployment on. consumers

A

less money to spend on in the economy

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34
Q

explain effects of unemployment on firms

A

less workers to produce products

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35
Q

explain effects of unemployment on workers

A

they have to do more jobs which could lead to having to work overtime and cause exhaustion

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36
Q

explain effects of unemployment on the government

A

they have to spend more money on subsidies and welfare payments instead of healthcare and education

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37
Q

explain the balance of payments

A

it measures all international economic transactions between the UK and its trading partners

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38
Q

explain current account deficit

A

a sign that a country is borrowing more money from other countries than it is lending to other countries

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39
Q

explain current account surplus

A

a sign that a country is lending more money to countries than it is borrowing from countries

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40
Q

what is the aggregate demand equation

A

consumption (65%) + investment (25%) + government spending (15%) - (exports+imports) (5%)

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41
Q

understand disposable income and its influence on consumer spending

A

disposable income is a person money you’re given before tax reductions. if people have more of it then they would spend more of it on the economy

42
Q

understand wealth and its influence on consumer spending

A

wealth is the total value of all your assets. if wealth increases then their will be more spending (wealth effect)

43
Q

understand inflation and its influence on consumer spending

A

inflation is the general rise in prices. if inflation is higher then it means prices are higher so their will be less spending

44
Q

understand rate of interest and its influence on consumer spending

A

rate of interest is the amount you pay back on a loan. if the rate of interest is higher then their will be less spending

45
Q

understand availability of credit and its influence on spending

A

availability of credit is the amount you can borrow from a bank. iff it is higher their will be more consumer spending

46
Q

explain gross investment

A

the total expenditure made for buying capital goods over a period of time without accounting for depreciation.

47
Q

explain net investment.

A

the total amount of money a company spends on capital assets minus the cost of the depreciation of those assets

48
Q

explain depreciation

A

the drop in value of an asset

49
Q

explain investment

A

spending on capital goods such as plant and equipment and new buildings to produce more consumer goods in the future

50
Q

how does rate of interest influence investment

A

the lower the rate the greater amount of investment in a business

51
Q

how does the accelerator theory influence investment

A

where investment expenditure increases at a faster rate. when demand or income increases

52
Q

how does the cost of the investment influence investment in a business

A

the cheaper it is the more investment there is

53
Q

how does technological change influence investment

A

if theirs an improvement in technology their will be more investment because they want the most up to date technology

54
Q

how does confidence influence the amount of investment

A

the more confidence in a business the more investment their will be

55
Q

how doe risk influence investment

A

the more risk the less investment

56
Q

explain capital spending

A

spending on new public infrastructure

57
Q

explain current spending

A

on providing public services

58
Q

explain transfer payments

A

child benefits

59
Q

explain exchange rates

A

the value of one currency compared to another

60
Q

explain the multiplier effect

A

an initial change in aggregate demand can have a much greater final impact on the level of equilibrium national income

61
Q

explain aggregate supply

A

the total output in the economy and the amount firms are willing to supply at a given price

62
Q

explain short run aggregate supply

A

where one factor of production is fixed - less than 4 to 6 months

63
Q

explain long run aggregate supply

A

where all factors of production are variable - more than 4 to 6 months

64
Q

explain reasons for shifts in a supply curve.

A

improvements in technology
changes in relative productivity
changes in education and skills
changes in government regulations
competition policy
changes in costs of production

65
Q

explain the circular flow of income

A

demonstrates how money moves from producers to households and back again in an endless loop

66
Q

explain debt

A

the total amount of government borrowing

67
Q

explain inequality

A

the number of people below the minimum level. of income

68
Q

what are the 3 multiplier equations

A

1/1-MPC or 1/MPS or 1/MPW

69
Q

explain factors that could cause economic growth

A

increase in capital goods
increase in labour force
new technology.
human capital

70
Q

explain actual growth

A

the growth that the economy actually experiences

71
Q

explain potential growth

A

the growth. the economy could’ve experienced if all resources were fully utilised

72
Q

explain the trade cycle

A

shows how economic growth can fluctuate in deferent phases

73
Q

explain the characteristics of a boom

A

higher GDP
lower unemployment
higher inflation rate
rising prices

74
Q

explain the characteristics of a recession

A

lower GDP
higher unemployment
lower inflation rate
cheaper prices

75
Q

explain the benefits of economic growth on consumers.

A

enables theme to consume more goods and enjoy better living standards

76
Q

explain the drawbacks of economic growth on consumers

A

higher prices for consumers

77
Q

explain the benefits of economic growth on firms

A

people have more money so buy more so they have greater demand for products so they create more profit

78
Q

explain the drawbacks of economic growth on firms

A

productivity can decrease so their average costs rise

79
Q

explain benefits of economic growth on the government

A

have to pay less subsidies and welfare payments so can spend it elsewhere

80
Q

explain drawbacks of economic growth on. the government

A

impact of inflation

81
Q

explain low unemployment

A

in the UK their are few people looking for jobs, meaning most are filled and less skill shortages

82
Q

explain low and stable rate of inflation

A

inflation is around 2% so prices aren’t too high but are just right for consumers

83
Q

explain fiscal policy

A

the use of government spending and taxation to influence the economy

84
Q

explain monetary policy

A

looks to influence the money supply flowing around the circular flow of income

85
Q

what are the two monetary policy instruments

A

interest rates
quantitative easing
real rate of interest
credit availability

86
Q

what are the fiscal policy instruments

A

government spending
taxation

87
Q

explain progressive taxes

A

rate. of tax rises as income rises

88
Q

explain proportional taxes

A

marginal rate of tax is constant leading to a constant average rate of tax

89
Q

explain regressive taxes

A

the rate of tax paid falls as income falls

90
Q

what are the components of loose/expansionary fiscal policy

A

decrease tax
increase government spending

91
Q

what. are the components of tight fiscal policy

A

increase tax
decrease government spending

92
Q

explain discretionary fiscal changes

A

deliberate changes in taxation and government spending

93
Q

evaluate fiscal policy

A

recognition lags - time it takes to recognise a need for changes in gov. spending and taxation
imperfect information - key data on the economy is often delayed
response lags - time it takes to respond

94
Q

explain automatic stabilisers

A

changes in tax revenues and spending as the economy moves through the trade cycle

95
Q

explain quantitative easing

A

increase the supply of money into the banking systems designed to encourage commercial banks to lend at cheaper interest rates
its used to stimulate aggregate demand when interest rates have fallen to historically low levels

96
Q

explain advantages of quantitative easing

A

it is another method when others don’t work
it lowers interest rates
it increases cash
cheaper mortgage. payments so more disposable income
banks have more money so can lend at cheaper rate
higher business and consumer confidence
avoids deflation

97
Q

explain disadvantages of quantitative easing

A

widens income inequality
uncertain time lags
increases house prices
thew Bank of England is a major holder of the government debt
economy becomes dependant on cheap money
low consumer confidence
high loan costs for some borrowers

98
Q

explain the liquidity trap

A

when interest rates are very low, any further decreases in the rate will have minimal or no affect on aggregate demand

99
Q

explain the Phillips curve

A

an economic theory that inflation and unemployment have a stable and inverse relationship

100
Q

explain what a supply side policy is

A

measures governments take to increase the availability of affordability of goods and services

101
Q

explain deregulation of labour markets

A

where the government reduces your employment rights and it makes it easier to have a flexible workforce

102
Q

explain the principal agent

A

where there’s a conflict in priorities between the owner of an asset and the person to whom control of the asset has been delegated to

Economics (4 decks)

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